The shift in approach to e-invoicing by businesses – from local and tactical to scalable and strategic

Historically, many businesses have wanted a quick local tactical solution to comply with new digital reporting requirements in Europe. For example, licensing a solution from a local niche software vendor or even simply outsourcing the digital reporting of data to a third-party compliance provider. In these early days of e-invoicing and e-reporting mandates, we saw parallel tax and invoicing processes where data was periodically uploaded or submitted to tax authority platforms as well as traditional invoices issued to customers and trading partners. This was going against what tax authorities were really aiming at - real time transactional reporting, the move away from paper to digital and certainly not trying to double up on efforts.

We’ve now moved to a position where businesses are playing regulatory “Whack-A-Mole”. Every day it seems as if there’s a new mandate, or change to an existing mandate, which businesses suddenly need to monitor, digest and implement a compliant solution and process. Given the number of e-invoicing and digital reporting mandates in place or confirmed on the roadmap (including France, Spain and Poland), tax and finance leaders are now looking at this strategically and holistically, looking to select and implement a global and scalable e-invoicing solution, as well as digitally transform how they interact with their customers and suppliers.

Businesses are actively looking to identify a single e-invoicing solution and process that not only meets the requirements of today, but also meets the requirements on the near horizon and beyond. Businesses are really getting to grips with this as a theme, getting a single solution in place that’s compliant across multiple jurisdictions, one that is going to scale as the business grows, or as the number of e-invoicing and e-reporting mandates grow.

Another realisation for business is that they can’t look at e-invoicing and indirect tax compliance as two distinct areas. It is clear that Governments and tax authorities are getting savvier with data and technology and many are going through their own finance transformation projects and digitalisation journeys. They are starting to run more detailed exemption reporting, analytics, and even AI on the larger data sets that they are receiving. This is used to spot tax errors (in real time under a pre-clearance model, or during an audit), as well as to highlight and profile higher risk taxpayers in relation to errors, omissions and fraud as they look to reduce the VAT Gap. 

Tax authorities are also starting to use the data they are receiving through e-invoicing and e-reporting to pre-populate VAT returns (e.g. the Annual VAT return in Spain produced by the tax authority based on the transactional data submitted under the SII). It is anticipated that the preparation of the VAT return as we know it will disappear, and taxpayers will review, edit and augment VAT returns pre-prepared by the tax authority. As such, it is imperative that tax leaders need to be involved in RFPs, vendor selection and ultimately the design and implementation of new e-invoicing processes. The move to e-invoicing will affect every traditional step in the indirect tax compliance lifecycle. As well as broader business requirements to be met, the tax department and leadership need to identify the tax requirements associated with e-invoicing and how these will impact current tax processes, data sets, and roles and remits of finance and tax professionals.

At Avalara, we make e-invoicing compliance simple. The Avalara e-Invoicing solution is designed to comply with regulations in over 60 countries and we’ve got the future covered, too. This cloud-based solution is flexible, scalable and allows you to quickly respond to new requirements.

As the go-to expert for business compliance software, we offer a broad portfolio of software products related to e-invoicing, such as tax compliance software, to keep business-critical functions running smoothly without being interrupted by future compliance requirements.